IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v143y2025ics0264999324003031.html
   My bibliography  Save this article

LAMP, informality and monetary growth rules in an emerging economy

Author

Listed:
  • Mirfatah, Maryam
  • Gabriel, Vasco J.
  • Levine, Paul

Abstract

We develop a small open economy model interacting with a rest-of-the-world bloc, containing relevant emerging economies’ features: heterogeneous agents with one household type displaying limited asset markets participation (LAMP), and an informal sector. We show that monetary growth rules are stable regardless of the level of asset market participation, i.e., unlike standard interest rate rules, they avoid the inversion of the Taylor principle. Estimation results using data from Mexico reveal that specifications with money growth rules are empirically superior and shocks are amplified by the presence of LAMP. In contrast, the informal sector acts as a buffer, lowering the variability of aggregate and formal fluctuations through an expenditure switching effect, and by providing a flexible labour market adjustment mechanism.

Suggested Citation

  • Mirfatah, Maryam & Gabriel, Vasco J. & Levine, Paul, 2025. "LAMP, informality and monetary growth rules in an emerging economy," Economic Modelling, Elsevier, vol. 143(C).
    • Handle: RePEc:eee:ecmode:v:143:y:2025:i:c:s0264999324003031
    DOI: 10.1016/j.econmod.2024.106946
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999324003031
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2024.106946?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:143:y:2025:i:c:s0264999324003031. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.